The current complaint-resolution process for retail investors at banks includes one critically unfair step, argues one advocate.

In a letter sent to Canadian self-regulatory organizations and Canada’s Ombudsman for Banking Services and Investments (OBSI), Ken Kivenko of Kenmar Associates argued that the internal resolution process offered by bank-owned and insurance company-owned dealers gets dragged out for too long. In particular, he spoke out against the involvement of the dealers’ internal ombudsman as a third step in the process.

“[W]hile some dealers may use the three-step complaint process appropriately, it is inherently prone to misuse and abuse … it gives investment dealers an incentive to reject complaints at the first two steps on the basis that only a relatively small number of complainants will persevere,” he said. “[T]he dealer then has a third chance to rectify any shortcomings or, more likely, again provide an unsatisfactory offer.”

Complaining investors who are unsatisfied with the outcome of the three-step process can go to OBSI as a fourth step. Under Section 13.16 of NI 31-103, a dealer must open the option of approaching OBSI either 90 days after receiving a complaint or when the dealer informs the complainant of its decision, whichever comes first.

Dealers are not allowed to offer an alternative independent dispute-resolution or mediation service at the same time as they make OBSI available. But the NI 31-103 provision is silent on the use of an internal ombudsman. That has allowed investment dealers to divert hundreds of complaints toward their own internal ombudsman and delay decisions on complaints beyond the 90-day timeline — without fear of sanctions.

Such internal ombudsmen, Kivenko wrote, are not truly independent of the dealers, and therefore cannot be impartial in making decisions. Investors who are diverted to the internal ombudsman as a step toward complaint resolution, he added, do not realize that they are in an adversarial relationship with the arbitrator. “The use of the descriptor ‘Ombudsman’ is not being made in good faith by the banks,” he said.

Complainants who take an appeal to the third step, according to Kivenko, are required to sign a Consent Agreement that may prejudice future proceedings. In particular, the agreement includes a confidentiality clause and, in at least one case, gives the ombudsman the right to access all of the complainant’s accounts with the bank. The opacity of the internal ombudsmen’s loss-calculation methodology, he said, also works against complainants.

Kenmar Associates, along with FAIR Canada and the Pension Investment Association of Canada (PIAC), have previously reached out to the Canadian Securities Administrators (CSA) to urge that the complaint-handling system be changed. The CSA has not yet acted on their recommendations.

“We [at Kenmar] have found that if a complainant is rejected 3 times, it is highly unlikely he/she will proceed further. This may explain the relatively small number of investor complaints that reach OBSI,” Kivenko said. “Therefore, we recommend that the CSA abolish the three-step process.”

The Ombudsman for Banking Services and Investments recommended more than $165,000 worth of remedies for consumers last year, to people who had complaints about their banks.(Dillon Hodgin/CBC)The Bank of Nova Scotia will no longer use the Ombudsman for Banking Services and Investments to mediate disputes with its customers, leaving the banking watchdog with just two of Canada's five big banks under its thumb.

Scotiabank has advised OBSI that it will no longer use its services to mediate complaints with its retail banking customers as of Nov. 1, and will instead choose to resolve them via other means.

"We are disappointed with the bank's decision, but we understand that, under current banking rules, they have the right to make the choice," OBSI spokesperson Mark Wright said.

GO PUBLIC'I feel duped': Why bank employees with impressive but misleading titles could cost you big time When it was founded more than 20 years ago, OBSI was pitched as a more efficient way for the financial industry to resolve relatively small disputes with its customers, and handle complaints that are best processed outside the legal system.

When bank customers have a gripe about a bank, they will most likely first complain to the bank itself, but OBSI gets involved once it has been escalated up the chain, and needs an impartial mediator to decide on an appropriate remedy.

Last year, OBSI recommended that a total of $165,023 be given to people with complaints about banks, with an average finding of $2,089 and the largest single recommendation coming in at $17,653. While its rulings are non-binding, it can levy individual awards of up to $350,000 and can name and shame financial firms who choose to ignore their decisions on its website. Last year, none of the big banks ignored an OBSI ruling, the watchdog said.

Canada's big banks admit they overcharged customers — what went wrong? Even though it is funded by industry (the big banks paid more than $1.1 million last year to fund OBSI's operations) the watchdog is considered to be an independent agency, and it's a free service for upset consumers.

In its most recent annual report, OBSI says it handled 370 investigations from consumers about their banks last year, or a little more than one per day. That was up from 290 complaints filed in 2016.

GO PUBLICDisappearing deposits: What happens when banks lose your money Last year, OBSI ruled in favour of consumers roughly one out of every five times it heard a case. In 2017:

OBSI got 131 complaints about Scotiabank, and the ombud sided with the customer in 23 of those cases.OBSI got 77 about CIBC, and ruled with the customer in 13 of them.OBSI heard 52 complaints about the Bank of Montreal, and sided with the customer in 13 of them.Those numbers don't include complaints from Canada's two biggest banks, Royal Bank and Toronto-Dominion, which both opted out of using OBSI years ago. Instead, they use another third-party firm to resolve disputes, called ADR Chambers Banking Ombuds Office or ADRBO.

John Lawford, executive director of consumer rights group the Public Interest Advocacy Centre, said Scotiabank's decision to leave the group is disappointing, because it's another body blow to an agency that could be powerful tool for consumers.

GO PUBLICAgainst the odds: Why customers often lose in battles with banks "It's not perfect but it's open, it's transparent, it's independent and it's fair to the extent it can be," he said.

"It's not toothless," Lawford said, "if people gave it a chance it wouldn't be."

While Lawford said he'd be in favour of a banking dispute resolution body that's fully funded and controlled by government and not beholden to the industry, the government has repeatedly shied away from taking that step.

"The best we can do is shove everybody back under the one umbrella [so] people will know where to take their complaints," he said.

In the absence of a fully independent body, Lawford said he is in favour of giving more powers of enforcement to OBSI, because he doesn't like the lack of transparency at alternatives such as ADRBO, which "doesn't adhere to the same openness principles," and isn't always transparent about decision details, he said.

Complaints about Canadian banks increased 28% last year, ombudsman says "For those customers of Scotiabank, they will unfortunately I believe have less success with their banking complaints and be dissuaded from bringing them."

Scotiabank's decision also affects customers of Tangerine, the online bank that Scotiabank bought in 2012, when it was known as ING.

The move also means that of the big five banks, only Bank of Montreal and CIBC will remain under OBSI's umbrella for their retail banking operations as of November — although customers of Scotiabank's investment arms would still be free to complain to OBSI.

"I'm concerned because I don't see any rational reason ... why BMO and CIBC wouldn't follow them out the door within months," Lawford said.

"We still think OBSI is independent and a proper place to do it and everybody should be going there."

Scotiabank declined to comment to CBC News for this story, or provide any indication how they plan to mediate escalated consumer disputes on its retail banking side in future.

The industry-funded ombudsman can't enforce payments or even compel member financial institutions to co-operate. And his recommendations are limited to claims of $350,000. Mr. Melville's biggest stick is to publish the names of firms that don't pay up – a "rather anemic remedy," Judge Shaughnessy suggested.

"A truly impartial and independent body would have control over its process," he declared bluntly.

Courts stepping up for aggrieved investors Barrie McKennaBARRIE MCKENNAOTTAWAPUBLISHED FEBRUARY 26, 2012UPDATED MAY 8, 2018Douglas Melville is an essential cog in the regime that shields millions of Canadian investors from abuse by financial institutions.

The Ombudsman for Banking Services and Investments can secure compensation if you lose money due to bad advice, mistakes or unfair treatment.

But the process falls short of "access to justice" for aggrieved investors, as Ontario Superior Court Justice Bryan Shaughnessy pointed out in a recent decision.

The industry-funded ombudsman can't enforce payments or even compel member financial institutions to co-operate. And his recommendations are limited to claims of $350,000. Mr. Melville's biggest stick is to publish the names of firms that don't pay up – a "rather anemic remedy," Judge Shaughnessy suggested.

"A truly impartial and independent body would have control over its process," he declared bluntly.

And so the judge cleared the way for a class-action lawsuit against Industrial Alliance's mutual fund subsidiary, Investia Financial Services Inc., along with Money Concepts (Barrie) and other affiliated companies and individuals.

The case centres on allegations that financial advisers systematically pushed clients of modest means to borrow large sums of money to buy mutual funds. The defendants deny the allegations, which haven't been proven in court.

But the case highlights something much more important: that the patchwork of federal, provincial and self-regulation in the massive financial advice industry isn't working.

Faced with regulatory lapses, the courts are stepping up. Already this year Ontario judges have given the green light to three major class-action lawsuits targeting financial industry sales practices.

"The three cases all show the courts are prepared to let clients proceed in a class action where either the firm or the regulator has not done an adequate job," said Ottawa lawyer John Hollander of Doucet McBride LLP, who represents investors in the Investia case.

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Earlier this month, another Ontario Superior Court judge gave the go-ahead to a class action against BMO Nesbitt Burns involving allegations of hidden fees on foreign exchange transactions in registered accounts, such as Registered Retirement Savings Plans. And an Ontario Court of Appeal judge has also cleared the way for a class-action suit against Investors Group subsidiary IG Investment Management Ltd. over losses suffered by investors due to alleged "market timing" of mutual funds.

The investor-adviser relationship is likewise attracting the attention of the Ontario Securities Commission. The OSC is exploring whether to impose a "fiduciary duty" requiring advisers to put their clients' interests first – a standard similar to what lawyers, accountants and other professionals face.

Naturally, the financial services industry wants less regulation, not more. Some major institutions already deem the ombudsman's moral suasion too onerous. Royal Bank of Canada and Toronto-Dominion Bank have pulled out of the banking complaints process entirely (although its brokerage subsidiaries remain in). In more than a dozen cases, firms have balked at paying settlements. TD's pullout last year forced a cut in OBSI's 2012 budget.

That prompted OBSI chair Peggy-Anne Brown to warn ominously last week that the ombudsman's survival is threatened by a "power struggle" between the interests of consumers and "large and powerful financial firms."

As Wednesday's annual RRSP deadline nears, Canadians are increasingly masters of their own financial destiny. But they're masters of a universe that's fraught with market risk and imperfect regulation.

Canadians are getting squeezed by a volatile stock market, meagre returns on savings products and a financial services maze that too many don't fully understand.

Many investors assume brokers and advisers have a duty to act in their best interests. But that's not the legal obligation, and the line is unclear when advisers are compensated through unseen fees charged by the producers of those financial products.

"There is no government-enforced standard or mandatory professional oversight for competent, ethical and professional behaviour," acknowledged the Financial Planning Standards Council, a not-for-profit group that oversees the Certified Financial Planner designation.

This matters now, more than ever, because policy decisions are shifting financial responsibility to individuals.

Workplace pensions are no longer the norm in the private sector as companies continue to scrap predictable defined benefit plans. Ottawa is essentially pushing an aging population into the arms of the financial services industry. RRSPs, tax-free savings accounts, registered education savings plans and the newly created pooled registered pension plans (for employees of small businesses) all encourage private savings, typically managed by financial advisers.

Shifting financial responsibility to individuals is a reasonable policy goal. But it doesn't absolve governments of the obligation to shield Canadians from harm.

[i]OBSI's Terms of Reference were amended in December 2013 to remove OBSI's systemic issue investigative powers.[/i

The Amended and Restated Memorandum of Understanding concerning oversight of OBSI among the Canadian Securities Administrators (CSA) and OBSI provides that the chair of the Board of Directors (Chair) of OBSI will inform the CSA Designates (the Alberta Securities Commission, the British Columbia Securities Commission, the Ontario Securities Commission and the Autorité des marchés financiers) of issues that appear likely to have significant regulatory implications, including issues that appear to affect multiple clients of one or more registered firms.

This means that if a bank is discovered to be financially abusing Mrs Jones, OBSI can act within their limited powers...however if a bank is discovered to be financially abusing millions of people in a similar, systemic manner, OSBI is forbidden to act but must instead inform the provincial securities commissions...who are 100% paid (and chosen?) by the very industry that OBSI would be investigating in this hypothetical case...

Thus, the system (and the oversight by OBSI) appears cleverly designed to erect a facade of protection of Canada, whilst truly acting to prevent meaningful protection of Canadians.

It is in the interests of investors and registrant ("Registrant" means a registered firm and a registered individual) that there is a process for the referral and review of these systemic issues.

The following protocol will be followed with regard to systemic issues.

Definition of Systemic Issues

Systemic issues as referred to in this protocol shall encompass the following:

multiple complaints against one or more registered individuals about products or services provided to investors,multiple complaints against the same registered firm about similar products or services provided to investors, orthe same complaint against multiple registered firms in a registration category and/or about similar products or services provided to investors which appear likely to have significant regulatory implications or to raise concerns about the registrant's fitness for registration.OBSI Process

The OBSI Chair must inform the CSA Designates, in writing, of any potential systemic issue identified by OBSI within 30 days of OBSI making such a determination, providing sufficient detail about why OBSI considers the matter to be a systemic issue.

For purposes of this protocol, CSA Designates means those CSA staff representatives who are members of the JRC.

In determining whether there is a potential systemic issue, OBSI may consult with the JRC.

On request of a CSA Designate, OBSI will provide the name of the registered firm and/or the registered individual along with details of the issue. OBSI will continue to investigate and proceed with complaint(s) in the ordinary course.

Response to OBSI Notification

The CSA Designate which is the principal regulator for the registered firm will make the determination to investigate the systemic issue and/or refer it to the appropriate SRO for further analysis. If the principal regulator is not a CSA Designate, the CSA Designates shall advise the principal regulator of the systemic issue. If the registered firm and/or registered individual(s) are registered in more than one jurisdiction, the principal regulator will coordinate and inform the other regulators of the systemic issue and where appropriate may coordinate the analysis with the other regulators.

To determine next steps, the principal regulator, in consultation with the appropriate SRO (where applicable), will evaluate whether a systemic issue exists and assess the impact of the systemic issue on the registrant, the registrant category and/or investors.

Once the initial assessment has been completed, the principal regulator and/or the appropriate SRO may pursue a variety of responses. These may include, but are not limited to:

initiating a compliance review or an enforcement investigation of the registered individual and/or registered firm relating to the systemic issue and/or the SRO undertaking a review of the registered individual and/or registered firm relating to the systemic issue, where this is within the jurisdiction of an SRO,initiating compliance reviews of the industry through sweeps on registered firm products and/or services, orassessing whether additional guidance and/or policy work are required to mitigate the systemic issue either at the CSA or SRO level.If, following an initial review, the conduct at issue is the result of the acts or omissions of the registered individual and/or registered firm, the principal regulator or appropriate SRO may document the matter in the registrant's permanent registration record maintained on the National Registration Database (Recorded under the Alert category of Regulatory Notes on the National Registration Database), and where appropriate, may take further regulatory action such as terms and conditions or suspension of registration in accordance with the appropriate regulatory requirements.

If the systemic issue is referred to:

an SRO for review, the SRO will keep the JRC and the principal regulator informed of the reviewa principal regulator that is not a CSA Designate, the principal regulator shall be asked to report back to the CSA Designates.Each CSA Designate will advise the JRC at the next JRC meeting of any potential systemic issue brought to the CSA Designate's attention, including the steps that have been taken or will be taken to respond to the potential systemic issue by the principal regulator or an SRO.

1 Systemic Issue was defined in the TORs as a matter such as undisclosed fees or charges, misleading communications, administrative errors or product flaws discovered in the course of considering a Complaint against a Participating Firm which may have caused loss, damage or harm to one or more other Customers of the Participating Firm in a similar fashion to that experienced by the original Complainant.

It is disturbing to read a copy of a letter to you and copied to me from Ken Kivenko who for many years has volunteered countless time to intervene for victims of the investment industry to help them attempt to resolve their disputes. The complexities of the industry and regulations are beyond the ordinary Canadian who does not have the high net worth to warrant a portfolio manager with a fiduciary responsibility. The majority of Canadians are dealing with representatives motivated by commissions and there is no legal requirement for them to look after a client's best interests.

The letter indicates that a new standard response from OBSI now reads in part:“We have completed our investigation of your complaint against Xxx . You can choose to pursue resolution through other forums such as mediation and arbitration. However, OBSI cannot discuss your complaint with the intervenor you appoint and you can only share our findings with your professional advisors. If it is not a mistake, this is totally unacceptable. Victims of industry fraud and unfair practices need help to have their disputes addressed. Civil litigation is often not affordable. An intervenor is often the only way a victim can have their dispute adequately addressed.

If that is indeed a new policy it would indicate it is time for Government to realize that an industry supported OBSI is not acceptable for a society that believes in protecting its citizens from unfair practices.

We remain hopeful that FINA will finally realize the issues that Canadians face when dealing with the investment industry and their regulators is not acceptable and that fair and affordable dispute resolution mechanisms are needed.

The GOC must introduce much needed regulation to establish fiduciary responsibility for the handling of Canadians savings and investments for all citizens. At the same time the GOC must also establish an independent investor protection authority with the powers outlined in our joint report with CARP "Giving Small Investors a Fair Chance" so that all Canadians may receive fair treatment.

Firms must ensure they make adequate disclosure regarding the use of internal ombudsmen

Firms must ensure they make adequate disclosure regarding the use of internal ombudsmen

By James Langton | December 07, 2017

Securities regulators are stopping short of giving the Ombudsman for Banking Services and Investments (OBSI) the power to make binding investor compensation recommendations — instead, they are warning them that they may face increased regulatory scrutiny for resisting OBSI's recommendations.

In a joint notice published Thursday, the Canadian Securities Administrators (CSA), the Investment Industry Regulatory Organization of Canada (IIROC), and the Mutual Fund Dealers Association of Canada (MFDA), are highlighting their concerns with current industry complaint-handling practices.

Firms that refuse OBSI recommendations, or provide clients with "low-ball" settlements, may face increased attention from the regulators themselves, the notice says. While not every instance of refusing an OBSI decision will necessarily attract regulators' attention, they warn that a pattern of resistance may well.

"The likelihood that staff would conclude that enquiries or a review is warranted will be significantly higher if a firm has shown a pattern of either refusing to compensate clients after recommendations by OBSI or settling matters at discounts from OBSI's recommendations," the joint notice says. A review by a provincial regulator or one of the self-regulatory organizations could lead to enforcement action, or conditions being sought on a firm's registration, the notice adds.

Regulators are also flagging the issue of firms using "internal ombudsmen" as an additional form of dispute resolution. Earlier this year, the investor advocacy group, the Canadian Foundation for Advancement of Investor Rights (FAIR Canada) and the consumer group, the Public Interest Advocacy Centre (PIAC), warned that this practice is potentially misleading and confusing to investors, and that it could be harming their access to redress.

Read: No more internal ombudsmen?

Some of these concerns are echoed in the joint notice from regulators, which calls on firms to ensure that they are treating clients fairly and that they make adequate disclosure regarding the use of internal ombudsmen, and that disclosure about OBSI's services is given "at least equal prominence", among other things.

"It is never an acceptable practice for a firm to operate its complaint handling system in a manner in which investors are being misled or worn down,"

the notice says.

"We expect firms to participate in OBSI's dispute resolution process in a manner consistent with their obligation to deal fairly, honestly and in good faith with their clients and to respond to each customer complaint in a manner that a reasonable investor would consider fair and effective,"

said Louis Morisset, chairman of the CSA and president and CEO of the Autorité des marchés financiers, in a statement.Last year, an independent review recommended that OBSI be given the power to make binding compensation recommendations, among a series of other proposed reforms designed to shore up the dispute resolution service. The regulators have yet to follow through on those recommendations.In the joint notice, regulators say they are "continuing to consider options for strengthening OBSI's ability to secure redress for investors”.

Bad newsObsi has lost a big bank to for-profit ADR Chambers OBSI did not publicly disclose the loss of membership but we were informed by Fund OBSERVER readers.OBSI communications confirmed the loss after we raised the question.We do not know the reason but the loss could have a chilling effect on obsi bank complaint investigators as job security is a powerful influencer . This is not good for complainants or Canada.

The Board must ensure better public disclosure and faster website changes.Kenmar continue to believe the board needs a disclosure committee..

More importantly is the ridiculous situation where Canadian banks can shop around for their own Ombudsman. Morneau needs to act before OBSI is slowly destroyed by political inaction.

K

=========

On Nov 29, 2017, at 5:22 PM, j wrote:

K

Please wake up. OBSI was destroyed before it was created. It was to be an agency of the federal government. It got hijacked by the banks when the legislation was passed but before it was promulgated.

This is a Vichy OBSI.

(admin addition: Vichy: It is a spa and resort town and in World War II was the seat of government of Vichy France from 1940 to 1944. The term Vichyste indicated collaboration with the Vichy regime, often carrying a pejorative connotation.[3] https://en.wikipedia.org/wiki/Vichy)

Stop believing the tooth fairy, pretending that this OBSI is legitimate. It is a con!

How many more banks and investment firms have to leave and set up their own “independent” ombudsmen?

OBSI dodges RBC, TD, Manulife bullet for nowThe country’s top securities regulators and a group of disgruntled investment dealers have agreed to continue trying to resolve irritants involving the Ombudsman for Banking Services and Investments (OBSI) while consumer advocate groups fume they were not invited to the closed-door meeting Thursday

Theresa TedescoMay 13, 20112:04 PM EDT

The country’s top securities regulators and a group of disgruntled investment dealers have agreed to continue trying to resolve irritants involving the Ombudsman for Banking Services and Investments (OBSI) while consumer advocate groups fume they were not invited to the closed-door meeting Thursday.

Sources told FP Street that officials from RBC Capital Markets Ltd., TD Securities and Manulife Financial Corp. laid out their grievances against OBSI, especially its loss calculation methodology used to figure out compensation to be paid to aggrieved customers, during the private gathering at the Ontario Securities Commission.

However, representatives from the Canadian Securities Administrators (CSA), the Investment Industry Regulatory Organization of Canada (IIROC), and the Mutual Fund Dealers Association (MFDA) apparently made it clear they are not willing to abandon OBSI or consider other options, including opening up the mediation to other participants.

Instead, the consensus that emerged – likely much to the relief of Douglas Melville, president of OBSI, who attended the meeting – was an acknowledgment that further dialogue on the brokerage’s complaints was preferable than the options put forward by RBC, TD and Manulife. In other words, the plan for now is to try to fix OBSI.

Since 2002, IIROC and the MFDA make it mandatory for its national members to use OBSI when trying to mediate and resolve disputes with their customers that can’t be resolved between them. However, the introduction of the CSA’s national instrument 31103, which is part of broader registration tabled in 2009, states only that dealers must provide their clients with independent dispute resolution or mediation services at the brokerage’s expense.

The large investment firms want IIROC and MFDA to adopt the CSA rule allowing them a choice of mediation and dispute resolution services for their customers.

But sources say IIROC and the MFDA indicated at yesterday’s meeting that they will attempt to be more “engaged” with OBSI. A long-standing complaint in the brokerage industry is that there is no oversight over OBSI and that the organization, created in 1996, is not accountable to any regulator.

OBSI operates according to a Framework for Cooperation under the Joint Forum of Financial Market Regulators. The mediator is subjected to an external review every three years. Its next review will be presented to regulators in September.

Consumer advocate groups are upset they were not invited to attend the private meeting yesterday, calling it “a major threat to investor protection.”

You might be surprised to learn there is no national consumer protection agency to resolve complaints against banks and other financial institutions.

When Alexis Keach lost her wallet, the Mississauga office manager thought her bank would protect her from unauthorized charges. Thieves stole $1,280 from her chequing account and racked up $1,150 in charges on her Visa card before the Toronto-Dominion Bank froze her accounts.

The agency is an industry-funded dispute resolution service...

Although Keach filed a police report, TD initially refused to reimburse her, claiming that she failed to protect her PIN. She flatly denies sharing the number or writing it down, and argues fraudsters routinely crack those four-digit codes. Keach asked TD to reverse its decision and got some money back. But she wonders what recourse she'll have if the bank refuses to refund the whole amount.

Not only are the banks free to ignore OBSI's decisions—they aren't even required to join

The answer? Not much. You might be surprised to learn there is no national consumer protection agency to resolve complaints against banks and other financial institutions. There is only an official-sounding entity called the Ombudsman for Banking Services and Investments. But OBSI is not a regulator—far from it.

It was a concept cooked up by the banks themselves in 1996 to dissuade the Chrétien government from creating a federal body to tackle consumer complaints

The agency is an industry-funded dispute resolution service, and it's hard to conceive of one with less teeth. Not only are the banks free to ignore OBSI's decisions—they aren't even required to join. That's tough luck for Keach in particular, because TD, along with Royal Bank, have both opted out of OBSI altogether.

So why does such a feeble banking ombudsman even exist? It was a concept cooked up by the banks themselves in 1996 to dissuade the Chrétien government from creating a federal body to tackle consumer complaints. In 2002, OBSI's mandate was expanded to include investment dealers.

But few consumers use OBSI, and those who do are often disappointed.

In theory, OBSI's complaint process sounds promising. The service is free for consumers, and OBSI will review a case if a customer contacts them within 180 days of being turned down by a member bank. The agency says it will provide a written decision within 90 days or explain why there will be a delay. Complaints can be submitted online, mailed or faxed. Last year, the leading subjects of complaints were mortgages, fraud and bank errors.

But few consumers use OBSI, and those who do are often disappointed. The agency sides with customers in less than a quarter of cases. Securities regulators require OBSI to undergo an independent review every five years, and last year's analysis, led by Deborah Battell, a former New Zealand banking ombudsman, highlighted several fundamental flaws.

First, unlike financial sector ombudsmen in other countries, OBSI's decisions aren't binding. Compensation is also a problem. The organization can recommend awards of up to $350,000, but it can't force banks to pay. The firms can choose to pay less. In 2015, among consumers OBSI deemed worthy of compensation, 18% received less than the agency recommended—an average of $41,927 less.

"The real mischief, however, is not that some consumers receive less, but that OBSI's current mandate allows this to happen. It, in effect, tilts the playing field in favour of firms," the report said.

Worse, even if OBSI decides in favour of a customer, a bank can simply ignore its decision. The agency names and shames such institutions on its website, but the fallout is minimal because most Canadians have never heard of OBSI.

Even such a limp overseer proved to be too much for RBC, which pulled out of OBSI in 2008, and TD, which left in 2011 (although their brokerage arms remain). They were irritated with costs and delays. But they also disagreed with many of OBSI's decisions. The year TD pulled out, it had received the most complaints. Instead, RBC and TD hired a private dispute-resolution firm called ADR Chambers to tackle retail customer complaints.

Ottawa needs to give OBSI a lot more teeth, and this is an opportune time to do it. The Liberals are currently conducting the biggest review of the Bank Act in 20 years.

All banks should be required to join OBSI, and its decisions should be binding. The $350,000 cap on compensation also has to go. It is entirely possible that consumers could be owed more than that, and they should also be compensated for any interest and aggravation.

As things stand, there's no mention of OBSI in the initial Bank Act consultation documents at all. This has to change. The number of complaints is rising and consumers deserve proper representation—not bureaucratic window dressing that is neither fair nor effective.

RE: Consultation DraftOmbudsman for Banking Services and Investments 0Terms of ReferenceI appreciate the opportunity to comment on the proposed revisions to the Terms of Reference of the Ombudsman for Banking Services and Investments (OBSI).I have read the independent review of OBSI by The Navigator Company (September 2007).

1. SYSTEMIC ISSUES1a. It is evident from the existing Terms of Reference that, up to this point, Participating Firms have enjoyed certain protections deriving from OBSI investigations, as indicated in section 7 under the heading, “The Ombudsman’s Principal Powers and Duties”:

7. The Ombudsman shall report to a Participating Firm information about any threat to Participating Firm staff or property of which the Ombudsman becomes aware in the course of the Ombudsman’s duties. (page 4)Nevertheless, up to this point, the investing public has not enjoyed similar protections, given that the Ombudsman has been expressly prohibited, under section 9(c), from conducting investigations that extend beyond a matter reported by a particular Complainant.

In other words, while the Ombudsman has had a duty to inform Participating Firms about potential harms to their staff or property, the Ombudsman, until now, has been prohibited from taking action to protect the public,

e.g. based on discoveries made in the course of investigating complaints, which could have a bearing on other clients.

This is a troubling disparity in the mandate of an organization, which claims to be independent of the financial services industry.

The Navigator report identifies the inability of the Ombudsman to address systemic issues as “a clear flaw in the consumer protection framework.” Investor advocates have called attention to this flaw in the mandate of OBSI for the past several years.

Although the consultation document contains amendments aimed at remedying this “clear flaw,” evidently such change will be too late for some consumers who have been harmed in the meantime. It is discouraging to find yet another instance in the Canadian context where changes necessary to protect the public interest have taken so long to occur.

1b. The definition of “Systemic Issue” (page 2) is too narrow and needs to be expanded along the following lines. Additions are indicated in bold type.

“Systemic Issue” means a matter discovered in the course of considering:

-a Complaint, which may have caused or could cause a loss or inconvenience to one or more other Customers in a similar or other fashion to that experienced by the original Complainant, or a matter, which could cause -a different type of loss or inconvenience to the original Complainant or one or more other Customers, or other issues which may not yet have caused a loss or inconvenience, but which are in breach of securities rules or regulations;

2. REFERRALS TO REGULATORY OR LAW ENFORCEMENT AGENCIES

2a. Section 10(c) on page 7 makes reference to the circumstances where a Firm fails to co-operate in the Ombudsman’s investigation of a potential Systemic Issue or refuses to follow the Ombudsman’s recommendation. Reference is made to the provisions of section 25 with regard to the consequences of such non-cooperation. The concluding sentence in this section contains the phrase, “OBSI may inform the regulating authority of non-cooperation by a Participating Firm.”

This should be changed to “OBSI shall inform the regulating authority of non- cooperation by a Participating Firm.”

2b. Section 10(d) states that “matters which in the judgement of the Ombudsman involve potential regulatory or criminal breaches may be referred to the appropriate regulatory or law enforcement agency.”

This should be changed to “matters which in the judgement of the Ombudsman involve potential regulatory or criminal breaches shall be referred to the appropriate regulatory or law enforcement agency.”

3. REFERRAL OF UNFAIR COMPLAINT DECISIONS BY PARTICIPATING FIRMS TO REGULATORY AGENCIESAs I expect OBSI is aware, the Mutual Fund Dealers Association of Canada and the Investment Dealers Association of Canada have been amending their complaint handling requirements. Member firms of these self-regulatory organizations are required to resolve client complaints in a prompt and fair manner. Evidently some complaints are not resolved fairly.

I refer to the OBSI statistics of the past two years in which 50% of decisions by investment firms were overturned at the outcome of OBSI investigations.

What are the consequences for the firm for having unfairly decided a client complaint? Since complaint handling is a regulatory matter, a provision should be added to the Terms of Reference that where a Participating Firm has unfairly decided a client complaint, the matter shall be referred to the appropriate regulatory agency. This is consistent with the provision regarding referral in the event of non- cooperation.

4. 90-DAY TIMEFRAME FOR INTERNAL COMPLAINT HANDLINGThe 90-day timeframe for complaint handling at the firm level is a positive development in the current redress system. Another positive aspect of the present amendments is the strengthening of the requirement that firms should inform complainants of the availability of recourse to OBSI after 90 days, both in the firm’s initial letter acknowledging the complaint, and also in the final letter with the firm’s decision (15(c) and (f)).The specification of the “90-day” timeframe needs clarification.

This should be specified either as 90 calendar days or 12 weeks to avoid confusion with business days.

Thank you for the opportunity to comment on the proposed revisions. Please do not hesitate to contact me should you wish to discuss my present submission.Yours truly, Pamela J. Reeve

Obsi does not have mandate to investigate systemic issuesObsi cannot investigate investment portfolio complaints involving Segregated funds Obsi have improperly accepted internal bank "ombudsman " as legitimate proxies for investment dealersObsi have in effect allowed dealers 180 days to issue a final substantive response Obsi are unwilling to assign even one board position to a retail investor voiceObsi do not name and Shame if a victim accepts a low ball offer Obsi reporting counts accepted low ball offers as successes Obsi now will be reviewed once every 5 years vs 3 years previously Obsi have not stepped up to a strategic role for an Ombudsman serviceThe Consumer and investor Advisory Council ( CIAC) appears to be inactive Obsi cannot make binding decisions One board member is from a dealer that has rejected a obsi recommendation CIAC should be built into the official obsi structureObsi do not have a stakeholder complaint system regarding their operations

OBSI should reveal whether it will involve its Consumer and Investor Advisory Council in the process used to identify director candidates (other than industry nominees).

We recommend obsi disclose board meeting minutes as was previously the practice .

We recommend obsi provide statistical reports quarterly as was previously the practice

We recommend that the 180 day period for a victim to file a complaint be used solely for contemplation and consideration of alternatives and that no extension be granted if a victim decides to use an internal bank "ombudsman".

We recommend that obsi dramatically increase promotion of its services among retail investors .

We recommend that the mandate of each Board Committee be publically disclosed and its membership also be disclosed, in order for the process to be transparent .

We recommend that professional service providers eg lawyers to a Financial Service Provider or Industry Entity be prima facie considered not to be independent.

The definition of Director is awkwardly drafted and we recommend that it be revised. We suggest that the community directors be defined as “independent directors” with the overarching principle of independence clearly articulated. OBSI could look to the Canadian Securities Administrators definition of independence set out in section 1.4 of National Instrument 52-110 or another definition used by comparable organizations to OBSI.

We believe that more emphasis needs to be given to knowledge and experience in “consumer and investor issues” and recommend that OBSI have at least three representatives from consumer or investor representatives on its Board. If it does not adopt this recommendation, we urge OBSI to justify as to why not.

We are of the view that iiroc and the mfda not be involved in the nomination of directors since they have oversight responsibility via the JRCThis should be left to IFIC and IIAC as is the case with the banking nominee ( nominated by the CBA)

We are also examining cooling off periods for Directors and a number of other governance issues raised in the 2016 Battell Report.

of interest is that the official Canadian Ombudsman for Banking Services and Investments (OBSI) was ‘neutered’ in 2013:“OBSI’s Terms of Reference were amended in December 2013 to remove OBSI’s systemic issue investigative powers.”

Just to be clear what “remove OBSI’s systemic issue investigative powers” means to Canadian investors…it means that if the official Canadian Banking and Financial Services Ombudsman comes across a problem with Mrs. Jones investments, and it appears as if that same problem is popping up in similar accounts all across Canada, that OBSI CAN NOT do more than investigate each victim case, one by one.

Even if it turns out that one million investors are being cheated, gouged or shortchanged by banks or investment dealers, they CAN NOT TOUCH anything that appears systemic. That, ladies and gentlemen is the power of well organized financial crime. OFChttps://www.obsi.ca/en/download/fm/528

click to zoom in on image

They MUST turn over anything they observe of a systemic nature (could affect millions, could earn banks billions) to the very people whom are paid 3/4 Million Dollar Salaries at the very top and who are paid and hand picked by...the financial industry. (OFC)

The Board of Directors (Chair) of OBSI will inform the CSA Designates (the Alberta Securities Commission, the British Columbia Securities Commission, the Ontario Securities Commission and the Autorité des marchés financiers) of issues that appear likely to have significant regulatory implications, including issues that appear to affect multiple clients of one or more registered firms.

It is now officially against the law for the official banking ombudsman of Canada, to enforce the law....unless they do it as slooooowly as can be done, one case at a time...

Now THAT is a multi billion dollar crime against all Canadians...with the Securities Commissions there to make certain that no one gets caught.

did you know that in April, 2014 Richardson GMP gave the finger to OBSI . As a result they were named and Shamed by a public News Release . https://www.obsi.ca/en/news-and-publica ... ardson-gmp That's bad but what's worse is who IIIROC nominated as their representative on the Board , Out of 178 possible members , IIROC chose a senior executive from GMP as their rep on the OBSI Board of directors. I guess the shaming was inadequate. Gives you confidence in OBSI and IIROC, eh?

I just now realized why OBSI was forbidden to investigate systemic matters that harm Canadians financially.......I won’t go into great detail here, but it hit me right after trying to convey something to a FINA Parliamentary Committee in Ottawa on this topic yesterday (see FINA topic in this forum for that story).

below were my thoughts that ‘evolved’ over the ensuing time after making my pitch to the Parliamentary Finance Committee, forgive the incompleteness of these thoughts.....I put there here so I do not forget:

that the layers and layers of ‘regulators’ who serve the financial industry, truly do “serve” the financial industry. Certainly those who are 100% paid by that industry can no more serve two different masters (the one who pays them, and the one they promise to protect (from the payer;)……than any other person or entity can serve two masters.

Hence, the public relations ‘tradeoff’ if I might call it that, or the ‘trick’ that is played upon the public is simply this:

Conflicted regulation and regulators are allowed to give an appearance of protection where in truth only one tiny percentage of protection is given….namely the “one bad apple” level of protection, and never the “bad barrel” itself. As I write this I hear Stan’s words to this effect in my head from perhaps a decade ago…..why do we forget such wisdom and let it be lost.

As I found myself getting emotional yesterday in committee, the benefit of this was that I think it was helping ME to better understand the problem that I must focus upon, going forward…..namely that it is ONLY the systemic issues that allow banks to rob the public of untold billions of dollars,…..and yet it is the systemic issues which are forbidden to be even looked at in our current systems. Here lies the “Ring of Gyges” which according to the Legend of the Ring of Gyges, allows the wearer complete invisibility from any acts they might perform. It is this simple legend which give me (today) perhaps the greatest clarity and understanding of what it is that allows our banks, and our bank owned investment dealers to rob Canadians of billions and billions and billions of dollars with not a whisper of concern.

These organizations have given themselves, gifted themselves, or simply purchased... the regulatory equivalent of the Ring of Gybes.

OBSI was expressly forbidden (in the last couple of years) to look at systemic failures, to investigate systemic failures or to prosecute systemic failures, and it now occurs to me that this is the door into the truth of much of our regulatory problem. They are paid to make a show of finding one bad apple here and there, whilst not letting the public know that the entire barrel is bad, and is ruining our entire supply……our entire society can be robbed with no consequence since the authorities are forbidden to even LOOK.

I am not saying that I discovered anything new here, except perhaps a new insight or understanding, and one that helps me to better understand what it is that I am seeking.

I also noticed this saying on the National Research Council Building which was built in Ottawa in 1933, which greatly inspired me on my quest for the truth

At the risk of repeating, or reposting an older article about OBSI, I submit this view from 2011.

It reinforces my personal experience with regulators, self regulators, and anything purporting to be a "protective" agency for investors…..namely that all are either 100% paid by the industry they are supposed to watch, or nearly 100% staffed by persons from or for the industry, or being abandoned/undermined by the industry.

In the case of OBSI they are both abandoning the Ombudsman (a little too consumer fair?) and/or capturing it at same time.

Industry representatives on the board of the Ombudsman for Banking Services and Investments (OBSI) are coming under fire from consumer groups for what they argue is an apparent conflict of interest.

Kerry Peacock, executive vice-president branch banking at TD Canada Trust, recently resigned from the 10-member board of the mediator in the wake of an attempt by TD Waterhouse Canada Inc. to opt out of using the services of OBSI. Now, there is growing pressure for Luc Papineau, a senior executive at TD Waterhouse, to step down from OBSI’s board.

Mr. Papineau and Ms. Peacock are two of the three industry representatives on OBSI’s board who were appointed by regulators — the Canadian Bankers Association, the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA). The other is Ed Legzdins, a senior vice-president at BMO Financial Group.

TD’s Ms. Peacock, who was the CBA’s appointee, has recently been replaced by Lynne Kilpatrick, senior vice-president personal banking at BMO.

However, consumer advocate groups have asked IIROC to replace Mr. Papineau, who is also a member of the national regulator’s Quebec District Council, because of TD’s criticisms of the banking and investment industry mediator.

Earlier this month, TD Waterhouse, RBC Capital Markets Ltd., Investors Group Securities Inc., Macquarrie Group and Manulife Financial Corp. filed an application with IIROC and the MFDA to be exempt from using OBSI to resolve disputes with disgruntled customers. That request was rejected by the regulators and since then there have been a series of meetings and discussions to try to resolve the matter.

Unlike banks, investment dealers are required to participate in OBSI but in recent years, a number of the bank-owned brokerages have been aggressively agitating to opt out because they want to use other complaint resolution providers, such as ADR Chambers.

“OBSI has already been irreparably damaged by the public disagreement,” investor protection groups wrote in a letter to industry regulators. “Because of all the negative publicity and hostility, OBSI will never the same again.”

Although there have been criticisms of OBSI, which was created by the financial services industry and funded by it, the dealers are unhappy with OBSI’s suitability and loss assessment process, which is used to determine suitability of investments and assessing investor losses.

According to a consultation paper released by OBSI last week, the majority of investment complaints involve “advice-based accounts,” that is, investors complaining they received poor advice, their investment strategies were unsuitable and that the investments didn’t perform as they expected.

“The overall objective of OBSI’s approach is to determine a reasonable estimate of the financial position the investors would be in had the unsuitable investment advice not been given and acted upon,” explains the mediator’s consultation paper.

OBSI’s compensation limit is $350,000 — five cases in 2010 were settled for more than $100,000. There are an estimated 15 cases in which an investment firm is refusing to act on OBSI’s recommendations.

In 2010, OBSI recommended compensation in 78 banking cases and 177 in the brokerage industry. Customers received compensation from their financial institution in just 20% of banking cases and 38% of the brokerage files, representing a total of about $3.8-million for all of Canada. Among IIROC firms, TD Waterhouse had the most cases with 72, followed by RBC Capital with 28, and 27 for Investors Group.

Investor protection groups argue that while OBSI may be flawed and now “emasculated” by the public criticism, it must still be preserved.

“While OBSI is viewed by many with suspicion due to a perceived pro-industry bias in recommendations, weak governance, excessive cycle times and 100% industry financing, it remains in many cases the only viable option available for aggrieved investors to gain some measure of restitution,” declared a letter sent to William Rice, chair of the Canadian Securities Administrators, the Ontario Securities Commission, IIROC and the MFDA, by Kenmar Associates.

Investor groups say the real issue is why the number of consumer complaints to OBSI have been rising steadily.

They are urging regulators to strengthen OBSI’s accountability and independence and ensure continued mandatory participation by all investment dealers.Facebook